Discuss CIPS L4M7 Exam Topic 2 Question 77

Which of the following is the correct statement about total ordering cost?

ARise as the average stock level rises

BEqual the number of orders placed times the cost of placing an order

CRise as the order quantity rises

DFall with the per period usage rate

Suggested Answer: B

Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier's invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.

The total ordering cost will be equal to ordering cost per order multiply with number of orders.

LO 2, AC 2.2

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12 comments · newest first

Freeman 2 months ago

I lean towards C. Bigger orders usually mean higher costs.

Cheryl 2 months ago

I feel like A could be right too. More stock, more cost?

Mitsue 2 months ago

I think B is correct. It makes sense to me.

Shaniqua 2 months ago

I always thought total ordering cost was just about the number of orders!

Joseph 3 months ago

Wait, D? That sounds off to me.

Jade 3 months ago

C is a common misconception, but it's not correct.

Quentin 3 months ago

I think A makes sense too, though.

Lai 3 months ago

B is definitely the right answer!

Trinidad 3 months ago

I practiced a similar question where we had to calculate costs based on usage rates, but I can't remember how that relates to this question.

Hailey 3 months ago

I feel like we discussed how stock levels affect costs, but I can't recall if that means they rise or fall.

Heike 4 months ago

I'm not entirely sure, but I remember something about ordering costs increasing with order quantity, which might point to option C.

Dona 4 months ago

I think the total ordering cost is related to how many orders we place, so maybe option B is correct?

CIPS L4M7 Exam - Topic 2 Question 77 Discussion